“ECONOMICS” NOBEL PRIZE – 2012 Edition

I have very little to say directly about this year’s Nobel Prize in Economics. I do not know whether the seemingly-technical contributions of Alvin E. Roth and Lloyd S. Shapley rise to the level of a Nobel Prize. However, I am mindful that the Nobel Committee has to give the award every year. They also have to show some diversity in the fields they recognize. But their issues are not mine. I have said to friends more than once that the prize in economics ought to be given every other year. I think there have been too many Nobel Prizes and too few really game-changing fundamental contributions.

My reactions here are different. Today’s New York Timeshas an interesting article on the prize. The first point that interests me:

Al [Roth] has spent the last 30 years trying to make economics more like an engineering discipline,” said Parag Pathak, an economics professor at M.I.T. who has worked on school-matching systems with Mr. Roth. “The idea is to try to diagnose why resource allocation systems are not working, and how they can be engineered to produce something better.”

I have no problem with better matching techniques for students applying to medical school or trying to get into certain popular courses and so forth. But I do object to the project of making economics more like engineering. Economics was born of the desire to elaborate and explain the spontaneous ordering of the market. It also tries to explain the conditions under which that ordering process may break down in markets. Markets generally coordinate but sometimes they may not. Let’s find out when, why, and how. It is very, very, important to understand – for both students and practitioners of economics alike – that markets are not like bridges. So I do not want an engineer teaching economics.

The second point has more to do with the impact of constructivist matching schemes on public policy. As a second best, where markets do not operate, they may improve things. However, this takes the spotlight off where it should be: permitting markets where they are forbidden. Or, perhaps, stated more “moderately” encouraging the discussion of a greater role for markets – as in human organs. Even Iran permits a market in kidneys, after all.

Nevertheless, I am amused by all the flurry of activity designed to show how wise and interesting the choice for this year’s economics Nobel is. Sometimes it is not.

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13 thoughts on ““ECONOMICS” NOBEL PRIZE – 2012 Edition”

Your comment pinpoints how much entrapped economic science is in a paradigm of closed-ended markets that an omniscient authority can decipher. I don’t see the Nobel Committee realizes this at all, however. What they see is the proposition of new ways of undermining the idea that the price system usually allocates better and if it doesn’t then is not a problem of the exchanges themselves but the institutions that define the setting for these exchanges to occur the way they do. Maybe the time is right to propose another Nobel prize award to social sciences, which would address this perspective, which is alien in the History of Nobel Prize awards in Economics, except for the awards given to F.A. Hayek, Douglass North and Vernon Smith.

@no name: You know what cracks me up? Internet cowards who hide behind anonymity to do drive by smears of others. Did Mario say that *he* should have won the prize?! No he didn’t. And how does *your* publication record compare to his? Oh, we can’t tell, because you are an anonymous coward who won’t put his own name to his post!

All of the Nobel prizes have been nothing but a thinly disguised promotion of socialism for decades. I see no reason to think this one is anything other. It appears to be an attempt to promote central planning as being far better than markets in allocating and matching.

Shapley and Roth’s research seems much better than what can be found in the newspapers.

The idea is how to exploit the gains from trade when prices do not suffice or are illegal. Shapley (and Gale) found a mechanism to enable mutually-beneficial matching between supply and demand in the absence of a price system, or as an aid to the price system.

Roth made the experimental part of the job and provided examples in university, schools, organ markets and hospitals.

It seems as if no non-regulated market has ever felt the need of the Shapley algorithm, but because regulated markets depend on the ingenuity and honesty of bureaucrats to work, that a mechanism exists to realize mutually beneficial trade opportunities in the interests of market agents is good news.

I don’t know if it is just an impression of mine that all the empirically-relevant examples cited by the Nobel committee come from heavily regulated markets where there can be no “invisible-hand” coordination toward efficient rules, which are instead imposed from without.

It seems, however, that this algorithm has nothing to do with the role of the market system as a coordination device, and while it may be of interest for those who may have to design a market mechanism, it is of limited interest in explaining the market system as a whole.

However, cheer up for mutually beneficial trades being realized! It’s good news.

) Add your voice to the millions calling for Suu Kyi’s immediate release – sign the petition here and urge the U. Beijing officials are not struck by the prestige of Xiaobo’s new distinction. Despite how it measures, it can still spark your interest, that’s
for sure.